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Issue 61, December Quarter 2019

Welcome to the Building Industry Bulletin

This quarterly Building Industry Bulletin provides updates on the latest trends within the Queensland building industry as relevant to the Department of Housing and Public Works (DHPW).

​ In this issue

Queensland regional construction activity update

The Department of Housing and Public Works (DHPW) engages economic research consulting firm, the National Institute of Economic and Industry Research (NIEIR) to provide independent, updated data and analysis on the profile of the Queensland building and construction industry using regional economic modelling and forecasting techniques.

The December quarter 2019 economic update from NIEIR shows that in 2018–19, Queensland construction activity [or total work done across the residential building (houses and units), non-residential building and engineering construction sectors] decreased by 6.9% to $47.4 billion.

In 2019–20, Queensland construction activity is forecast to decrease by 5.4% to $44.9 billion. This is due to declines of $1.7 billion in engineering construction and $1.0 billion in residential building. An increase of 7.6% to $48.3 billion is forecast for 2020–21.

Queensland engineering construction activity (e.g. roads, water, sewerage and mines) decreased by 9.0% to $20.5 billion in 2018–19. Over the 2 years to 2020–21, activity is forecast to average $20.0 billion with no significant growth in the sector. Major projects that have moved to the construction phase include the Sunshine Coast Airport expansion, Capricorn Highway duplication from Rockhampton to Gracemere and the Whitsunday Coast Airport upgrade.

Total non-residential building activity (e.g. offices, shops and hotels) decreased by 13.5% to $7.0 billion in 2018–19. This is forecast to be followed by an increase in activity of $193 million (2.7%) to $7.2 billion in 2019–20. Total non-residential building construction is projected to average $7.1 billion over the 2 years to 2020-21. Major projects that have moved into the construction phase are the Waltons Department Store redevelopment (Fortitude Valley) which includes a new Torrens University campus, the Springfield Central Sports Complex and the Central Queensland Inland Port (near Emerald).

In 2018–19, total residential building decreased by 1.9% to $19.9 billion. Over the 2 years to 2020–21 private renovation expenditure is forecast to have average annual growth of 11.4% reaching $8.0 billion, new dwelling construction expenditure is forecast to have an average annual decline of 6.0% to $11.7 billion and total residential dwelling construction (including public dwelling construction) is projected to have an average annual increase of 0.1% to $19.9 billion.

The total number of people employed in the Queensland building and construction industry (residential dwelling, non-residential building and engineering sectors including contractors, trade contractors and consultants) in 2018–19 reached around 240,000. The estimated unemployment rate for the construction industry for December quarter 2019 was 5.0% compared to 5.6% for Queensland in December quarter 2019.

Building Legislation and Policy Contractor and Consultant tracking survey

To help understand the state of the building and construction industry cycle in Queensland, HPW conducts quarterly research surveys with contractors and consultants registered with the department's prequalification (PQC) system. In the December quarter 2019, Kantar Public surveyed respondents across conditions including employment supply, workloads and labour costs, with all data reported by quarter.

Contractors

Contractors indicated on average they were operating at 63% of capacity in December 2019, up from 59% in September 2019. In the last 3 months, 34% of all contractors reported their workload had increased, up from 21% in September 2019. There was continued optimism regarding the forward view of work and planning, with 37% of contractors believing their workload would increase over the 3 months to March 2020 (39% in September 2019).

Contractors’ beliefs about labour cost fluctuations remained consistent in December 2019 with 55% of contractors indicating labour costs would stay the same in the next 3 months and while 33% believing they would increase during this period (compared to 62% and 32% in June respectively). There was, however, a significant rise in contractors’ perceptions that building material costs would rise, with 59% indicating an increase in December 2019 compared to 43% in September 2019.

In December 2019, 18% of contractors reported difficulty employing subcontractors overall (14% in September 2019). In the same period, 33% of contractors reported having difficulty finding suitably experienced or qualified subcontractors, the highest level reported in 2019. Of those contractors experiencing difficulties employing subcontractors, 59% in December 2019 suggested this difficulty was across all trades (an increase from 52% in September 2019).

The most mentioned trades for those experiencing difficulty employing subcontractors were carpentry (54%), plastering (41%) and concreting (32%). Among those respondents who had experienced subcontractor shortages, 'Increased project costs due to an increase in subcontractor rates’ and ‘Project delays’ both significantly impacted those contractors having difficulty employing subcontractors.

On average, contractors estimated that 41% of their workload over the previous 3 months was on behalf of local, state or federal government.

Consultants

Workload remained stable in December 2019 with consultants indicating, on average, they were operating at 67% of capacity (66% in September 2019). In the same period, 34% of consultants reported their workload had increased over the previous 3 months (an increase from 31% in September 2019). The projected change in workload decreased in December 2019 with 26% of consultants predicting their workload would increase over the next 3 months (39% in September 2019). Difficulties in finding work in December 2019 (57%) remained consistent with the levels reported in September (59%) and June 2019 (62%).

In December 2019, 25% of consultants indicated they were seeking to increase their staff numbers (26% in September 2019), while the majority (65%) reported they were seeking to maintain their current staff numbers (64% in September 2019). The difficulty employing staff reported by consultants has remained consistent since December 2017 with almost half of all consultants (49%) in December 2019 indicating they would not have difficulty employing staff over the next 3 months (up from 47% in September 2019).

Of the consultants surveyed, 70% believed fees would stay the same over the next 3 months (down from 74%), 14% expected them to increase (up from 9%) and 14% anticipated a decrease (down from 16% in September 2019).

PQC tender activity

Tender activity for Queensland Government building projects over $1 million averaged 5.4 tenderers per project in the December quarter 2019, decreasing from 6.2 in September quarter 2019. Looking at open tenders accepted in the December quarter 2019 (by value) compared to the September quarter 2019, the breakdown by project type was 58% for education-schools (up from 44%), 31% for Authorities (up from 2%), 5% for hospitals/health/welfare (down from 14%), 4% for industrial/transport (up from nil), and 2% for administrative/offices (up from nil). No activity was recorded for the recreation (down from 32%), residential (down from 8%) and the education-colleges sector (previously nil).

The Fitzroy region accounted for the largest proportion of all open tenders (by value) in the December quarter 2019 (26% up from nil). This was closely followed by the Brisbane (25% down from 73%) and Wide Bay Burnett regions (25% up from nil). Other activity was recorded in the Far North (15% down from 17%) and Moreton North/Sunshine Coast regions (9% up from nil). No activity was recorded in the Morton South/Gold Coast (down from 8%), Darling Downs (down from 2%) and Northern, Central West, Mackay, North West and South West (all nil in the previous quarter).

There was higher than average tender activity for projects within the authorities sector and Far North region during the December quarter 2019.

Building material cost comparison

In the December quarter 2019, the only building materials monitored by DHPW that recorded a cost increase from the previous quarter were reinforcing steel mesh (6.8%) and aluminium fixed windows (0.6%). No materials recorded a decrease during this period.

According to the Cordell Building Cost Guide, between December quarter 2018 and December quarter 2019, building materials that recorded the most significant increases in cost were 25mpa concrete (8.9%), aluminium fixed windows (8.4%), F8 pine 90mm x 35mm (8.1%), reinforcing steel mesh (6.8%) and float glass tinted – 4mm thick (6.0%). No materials recorded a decrease in cost over the 12 months.